Countdown to healthcare reform
January 16, 2013
· If you like your 401(k) retirement savings account, you're going to love what healthcare reform does to your employer-provided health care plan.
In a post-Obamacare future, expect more employers to adopt defined contribution healthcare plans. Instead of providing coverage, they will throw a set amount of cash at workers and have them buy their own coverage on private employer-sponsored exchanges.
That future isn't here yet - right now only about 5 percent of companies are using this approach, according to Alan Cohen, chief strategy officer of Liazon, a firm that sets up private exchanges for companies. But it is fast approaching. Cohen expects that in 5 years, half of all companies will be offering these private-choice dollar benefit plans.
Major elements of the Patient Protection and Affordable Care Act are approaching even faster than that. On October 1 of this year, the first massive open-enrollment health insurance season in history starts, when the state and federal exchanges open for business.
Workers at big companies probably will face fewer immediate changes than everyone else. But those who buy their own insurance, go without coverage or work for small employers will see dramatic changes in the coverage available to them. Here's an early take on what to expect and what to do about it now.
-- This tax season matters. Take a look at your 2012 tax return to see if you're going to qualify for subsidies. People who earn 400 percent of the federal poverty level or less will have their premium costs capped and excess premium covered by tax credits.
Those figures do get adjusted annually, but using 2012 numbers, that means that even families earning four times the poverty level - roughly $44,680 for singles and $92,200 for that family of four - would see their health insurance costs capped.
At that income level, premiums couldn't cost more than 9.5 percent of family income. Lower levels of income would qualify for lower caps and higher subsidies.
People with incomes up to 250 percent of the poverty line ($22,340 for singles and $46,100 for families of four, based on 2012 figures) also will qualify for lower deductibles and copayments subsidized by the federal government.
The income used to determine this is modified adjusted gross income, calculated basically by adding tax-exempt interest income and tax-free Social Security benefits to adjusted gross income.
So, if your 2013 tax return puts you on the cusp, check again to make sure there's not a retirement contribution you could make or another move that would bring your income below those key levels.
And married couples who have been filing separately should give very strong consideration to filing jointly, suggests Cheryl Fish-Parcham, deputy director of Families USA, a consumer advocacy organization. Complex regulations will make it difficult or impossible for those married-separate filers to claim the subsidy credits.
-- Get educated. Fish-Parcham and her colleague, Claire McAndrew, a senior policy analyst, say they most worry about newcomers to the health insurance buffet getting scammed or misled once they are both required to buy health insurance and responsible for choosing their own. Beginning on October 1 this year, there will be public exchanges featuring health insurance plans that meet minimum federal guidelines. That means they won't exclude people with pre-existing conditions and they won't have lifetime spending limits, for example.
There will also be web-based exchanges run by private companies, like the ones run now by companies like ehealthinsurance.com and Netquote.com. And private exchanges available through employers from companies like Liazon, which runs its own Bright Choices exchange. "We're a little concerned about the confusion that might result," McAndrew said.
All of the exchanges would be required to carry policies that meet new minimum federal guidelines and they would be required to meet federal pricing rules too. But the private exchanges might offer more separate coverage, such as vision and dental care. And the state exchanges will also screen for other federal and state assistance programs.
For now, it's good to look at your family and analyze your use of the healthcare system. Do you have lots of well-child visits? Chronic conditions? Do you want to pay higher premiums for first-dollar coverage or less for higher-deductible plans? If you know early what your health spending patterns are, it will be easier for you to shop for health insurance.
-- Save money now. If you currently have a high deductible plan with a health savings account, max out your contribution for 2012 and 2013. It's not clear that these programs will all survive in their current form going forward; you may find yourself with other choices that don't allow you to use an HSA, and that money could come in handy later.
Furthermore, many people may see their health insurance costs rise in 2014, warn experts. Costs could rise as insurers stretch to meet higher coverage standards. And with new rules limiting the markups that could be charged to older subscribers, some young people could find their insurance costs rising, said Sam Gibbs, president of eHealth Inc's Government Systems division.
As more employees are nudged to cheaper high-deductible plans in the future, they will want to learn more about the healthcare they are buying, suggests Ceci Connolly, managing director of the PwC Health Research Institute. She said that after being switched to a high-deductible plan herself, she started questioning her healthcare costs more carefully.
"When the first $3,000 to $5,000 is out of your own pocketbook, you might think differently about the different tests and screenings; the things that get ordered up quickly."
A first step? Check at the government's website www.healthcare.gov/compare to see data on doctors and hospitals. Begin to think about finding better doctors and hospitals to achieve better health. More and more of that information will be made public as we move into the future of healthcare.
*Linda Stern is a Reuters columnist. The opinions expressed are her own. The Stern Advice column appears weekly, and at additional times as warranted.